When the actual inflation rate is equal to the expected inflation rate the economy will be ________ and the SP curve will ________.
A)in long-run equilibrium;shift upward
B)in disequilibrium,at an output level less than the natural rate of output;shift upward
C)in short-run equilibrium;shift upward
D)in short- and long-run equilibrium;be stable

Question

Quizplus · Accepted Answer

When the actual inflation rate equals the expected inflation rate, there is no pressure for firms to adjust their prices, and there is no need for the economy to adjust its output level. As a result, both the short-run and long-run aggregate supply curves would remain stable. Therefore, choice D is the right answer.

When the Actual Inflation Rate Is Equal to the Expected